Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 35

What are the similarities between the Direct Materials Inventory account of the manufacturer and the Merchandise Inventory account of the merchandiser? Are there any differences between the two accounts? If so, what are they?

Step 1 of 3

Direct materials inventory account is an inventory account which is maintained by the manufacturer who purchases the raw material from the supplier. The manufacturer converts the raw material into finished goods by manufacturing processes and sells them.

Merchandise inventory account is an inventory account which is maintained by the merchandiser who purchases the inventory (product) from the supplier. The merchandiser simply sells the inventory (product) without processing it any further.